Nvidia Post-Earnings Flows Contain Shares In Tight Range
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It was a volatile trading session today, with the S&P 500 finishing up about 40 basis points. That actually understates the day’s swings, as the index climbed roughly 1% in the morning before giving those gains back, then recovered slightly into the close. The day was largely driven by liquidity coming into the market and implied volatility ramping up into the close, which pushed the index lower. In the end, much of what unfolded was what I alluded to yesterday.
The VIX 1-day closed at a scorching 27, which suggests there should be a sizable rally tomorrow—at least at the start of the day—until implied volatility settles or the liquidity drain takes over.
Tomorrow is a Treasury settlement date with $18 billion due to settle, which means we could see liquidity pressure return to some degree. Repo rates dipped today to 3.95%, which suggests SOFR may be lower in the morning. But more importantly, repo rates could rise again tomorrow.
Nvidia (NVDA) did its usual song and dance with the beat-and-raise routine it trots out every quarter. One day, analysts will wise up and adjust their numbers higher so these “beats” aren’t really beats. All I had to do was look at historical trends to come up with my estimates: revenue of $57 billion and a guide of $64 billion. Without any channel checks or fancy models, I was able to get the revenue number, and was only $1 billion below the guide.
Then there was the recycled news about a $500 billion backlog, originally discussed on October 28, which, of course, helped push the shares up tonight.
Anyway, the stock remains in positive gamma, which is likely why it’s stuck in this $195 to $196 range. On top of that, the $190 calls for Friday were trading at $5.25 at the end of the day Wednesday, which means they’re basically breaking even or up slightly, since IV is going to come down hard tomorrow. So it will be curious to see how long it takes for those calls to start getting dumped by the $190-and-above crowd tomorrow.
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. ...
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